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Growing roots along the Silk Road

2015-03-17 10:23:05Source:China DailyAuthor:

Lower costs help producers cut expenses as they seek more international sales

Henan Rebecca Hair Products Inc, one of the world's largest wigmakers, is going to set up its fourth overseas plant in Africa next year, said Zheng Youquan, the company's founder and board chairman.

The new factory, to be located in Namibia, will employ about 1,000 workers, more than 95 percent of them local residents, Zheng said.

Zheng, 61, a member of China's top legislature, established Rebecca Hair in Xuchang, Henan province, in 1993. The company was listed on the Shanghai Stock Exchange in 2003.

Rebecca's products mainly use two kinds of raw material: real human hair and synthetic fiber. These products are sold to more than 40 countries and regions in North America, Europe, Asia and Africa.

The company, with total assets of 3.7 billion yuan ($590 million), has factories in Nigeria, Ghana and Cambodia. It has subsidiaries in London, Chicago and in Nigeria's biggest city, Lagos, and it claims to be one of the world's top wigmakers.

According to Zheng, last year's sales grew 17 percent in Europe, 13 percent in Africa and 27 percent in China. Zheng said that building factories in African and Southeast Asian countries, where wages are lower than in China, has helped the company cut costs.

"The monthly wage for African or Cambodian workers is about $100. We can't hire a worker at that rate in China," he said, because the average monthly income of Chinese workers is about $400.

The company has more than 11,000 employees, and about one-third of them work in the foreign factories, he said.

Wang Junqi, general manager of Rebecca Fashion Ltd in Nigeria, said that the company is setting trends in Africa and many local companies are following suit.

Rebecca Hair's revenue has increased tremendously since its establishment, and it aims to create a truly international brand using its own technology, said Zheng.

Going global will be the company's key strategy in the coming years, along with the national strategy of reviving the ancient Silk Road, Zheng said, adding that hewill build more factories in Southeast Asia and Africa.

The Silk Road Economic Belt and the 21st Century Maritime Silk Road, as the initiatives are officially called, are a land-based route from China via Central Asia and Russia to Europe, and a strategic maritime path through the Strait of Malacca to India, the Middle East and East Africa. The initiatives began to take shape in 2014 with a focus on infrastructure.

In the Government Work Report delivered on March 5, Premier Li Keqiang encouraged Chinese companies to go global and invest overseas, promising that the government will protect the rights and interests of Chinese enterprises overseas.
"We will broaden the channels for using foreign exchange reserves, provide better financial, information and legal services, and offer consular protection to Chinese firms investing abroad, to guard against risk," Li told lawmakers.

Zheng said that setting up factories abroad has not only cut labor costs, but also helped expand the client base in the countries along the "One Belt, One Road" routes.

"By establishing factories overseas, we can surmount the difficulties caused by the appreciation of the renminbi against the euro and many other currencies," he added.

There was a 2.5 percent depreciation in the spot exchange rate of the yuan against the dollar in 2014, the first decline since 2005 when China began reforms of the yuan's exchange rate mechanism.

Other major currencies, such as the yen, the rouble and the euro, have also weakened, exerting more pressure on the renminbi.

Tang Yuxiang, board chairman of Zhengzhou Yutong Group Co Ltd, a large industrial group that specializes in bus manufacturing, said that the appreciation of the renminbi against the euro has compromised the competitiveness of his company's products in overseas markets.

"In European countries, the vehicles made by Yutong are even more expensive than those from Mercedes-Benz AG, and many retailers have frequently complained about the high prices of our products," Tang said on March 10 during discussions with other lawmakers during the annual session of the country's top legislature - the National People's Congress.

Listed on the Shanghai Stock Exchange in 1997, Yutong has exported buses to markets in Asia, Europe, Latin Americ and the Middle East. In 2012, the company entered the United States market.

"Because of the appreciation of the renminbi, much of our market share in Southeast Asia has been grabbed by Japanese vehicle makers," he said, adding that the yen has "gone too far" by depreciating more than 40 percent in the past two years.

Tang called on financial regulators to keep a close eye on currency rates to ensure that Chinese exporters will not suffer much economic loss.